Every internet user in Nigeria can tell that connectivity has been generally poor of late. This has also impacted businesses and disrupted live streaming. To crown it all, subscription prices are on the high side. In an investigation to sort out the cause for all this, excessive taxation on telecommunication companies could be the cause.
With a staggering 586% rise compared to the same period last year, MTN Nigeria, the largest mobile network provider in the country, paid ₦232 billion in taxes in the first half of 2024. The telco paid over 54 separate taxes to different federal, state, and local governments in 2024.
With the amount of taxes expected to continue growing, telecoms like MTN Nigeria will face an even heavier tax burden by the end of 2024. The bulk of these taxes are collected by state governments in Nigeria, as reported by the Association of Licensed Telecommunication Operators of Nigeria (ALTON).
The Breakdown of The Taxation on Nigerian Telcos
Among these charges are storage licenses, convulsion levies, sewage fees, and building permits. ALTON President Gbenga Adebayo revealed that in 2024, these taxes boosted the operational costs of telcos by 50%.
A few taxes are mandated by law, while others are levied without due process. To give just one example, in Bayelsa, a newly established group called the National Association of Telecom Landlords has instituted fees that are not authorised by the state’s statutes. There are less than twenty federal taxes that are primarily based on legal principles, while there is a mixture of legally-backed and arbitrary taxes at the state and local levels.
Adebayo stated that revenue is the primary driver of the multiple taxes. The telecoms industry is seen as a cash cow due to its high profitability. MTN Nigeria did not promptly address requests for comments.
Broadband infrastructure expansion is jeopardised by the present tax climate despite its critical importance in connecting millions of Nigerians to the digital economy. Data from the Nigerian Communications Commission (NCC) shows that as of December 2023, 27.91 million people in 97 localities still need access to dependable high-speed internet. There is no access to fast internet in certain states, such as Niger.
The uneven distribution of right-of-way fees is a big problem since it permits telecommunications companies to install fibre optic lines on property held by the state. While the majority of federal government organisations charge N145 for laying fibre on highways, the Nigerian Inland Waterways Agency (NIWA) levies a fee of ₦2,500 per linear square meter for the installation of fibre along rivers and bridges.
Costs can range from ₦1 per kilometre in Kwara to ₦9,000 in Oyo State, among other states. Osun, Lagos, Cross River, and Abuja are among the states that have leased out fibre ducts to operators, protecting wires along the way. The arrangement is more costly, though, because the lease and the right of way must be charged separately. While operators such as Globacom, MTN, and Airtel use these ducts, they continue to incur substantial expenditures.
States have lesser revenue sources, so they continually squeeze telcos, Manish Kochhar, a former chief technology officer of Globacom, revealed during an interview. He went on to say that states often do nothing to safeguard the cables from construction-related damage, even after paying the lease or RoW expenses. Because of this, the quality of the cable and the connection throughout Nigeria suffer.
With the intention of reviewing and harmonising these levies, the Presidential Fiscal Policy and Tax Reforms Committee was founded in 2023. On the other hand, their progress regarding telecom taxes remains unchanged. In response to calls for comment, committee chairman Taiwo Oyedele remained silent.
The two sources said that certain telecom companies are negotiating directly with states, rather than going via an intermediary. Free, high-speed internet access in public buildings was an incentive for Lagos State to waive a right-of-way for MTN Nigeria in 2023. Operators who partnered with Edo State were provided with a waiver and tax benefits.
State ICT commissioners from Niger, Kogi, and Cross River urged telecom providers to work more closely with them to address these concerns during an ATCON-organized telecom stakeholder meeting. Because larger operations are able to negotiate better terms than smaller ones, others worry that interacting one-on-one is a short-term solution.
